HONGSA MINE MOUTH POWER PROJECT

PROJECT BACKGROUND

PROJECT BACKGROUND
1. Project Location

The Hongsa Mine Mouth Power Project is located in Hongsa District, Xayabouri Province, Lao PDR in the northwest region, approximately 90 Km from Xayabouri urban province to Nguen International Immigration Checkpoint and 34 Km northwest from Lao-Thai border Checkpoint (Huay Kon Checkpoint at Nane province). Ideal location, geology, natural resources for power generation.
The project is mainly consisted of two components as a Power Plant and Mining, a capacity of Thermal Power Plant is 3 Unit x600 MW, totally is 1800 MW. There are two dams will be constructed to reserve water for cooling system and any using purposes, expected that water value required for Power Plant is approximately 40-50 M.Cu.m annually, Lignite Fired to power generation is approx. 13,60 M.ton a year.

                             A 1,800 MW MINE MOUTH POWER PROJECT

                      
MAP1: location of the project
The 500 kV transmission line approx. 67 Km from Power Plant to Lao-Thai border will be constructed and 115 kV transmission line will be constructed to connection Electricity du Laos (EDL) domestic network. A part from these, there is road upgrading 31 Km long to Lao-Thai border and a By-pass road will be constructed for avoiding road traffic to Nguen District not allowed pass through the Power Plant area. For the first phase of power generation, limestone from Nguen quarry will be used for dust collection system (Electrostatic Precipitator – ESP).
2. Project Rationale
The Lao PDR is land-locked country, 70% of land area is mountainous, it is one of the word’s poorest countries with almost half of population living under the poverty line with the average GDP per capita per annum below USD 500. Studies by institutions such as the World Bank have identified two main options for economic growth – the export of tropical timber products and export of hydropower. However, as the large-scale exploitation of tropical timber products is viewed as non-sustainable and environmentally degrading, this option is not acceptable to the Government of Lao PDR (“GOL”). One of the few ready available and sustainable to the GOL to achieve its stated objective of economic and social development is hydropower as neighboring Thailand represents a long-term viable customer for power generation from Lao PDR.
3. Historic Background
The development of hydroelectric power projects in the Lao PDR for export of electricity to both Thailand and Vietnam has long been addressed in inter-governmental agreements between the respective countries. In addition to benefits derived from the export of electricity, the development of hydroelectric power capacity is also needed to satisfy both current and domestic electrical energy demand for industrial, residential and domestic purposes.
For Thermal Power Development Project is the first project in Lao PDR to be chosen by GOL to meet its strategy of economic and social development plan, with potential natural resources available. Therefore in the year 1994, Thai-Lao Lignite Company (TLL) has entered into the Project Development Agreement (PDA) with GOL to develop 700 MW Thermal Power Plant Project in Hongsa district, Xayabouri province, Lao PDR.
In Dec 2006, the supersession of Banpu Power Limited (“BPP”), a wholly-owned subsidiary of Banpu Plc. (“Banpu”), signed a Heads of Agreement (“HOA”) with the GOL with Exclusive Rights to develop a lignite mine and a lignite-fired power project. Since then, Banpu has been developing both projects industriously.
In 27 December 2007, the tariff MOU was signed with EGAT. Since then the process to establish project company has been proceed continuously, while pre-construction work at Hongsa site has been started. In 24 July 2008, the GOL basically has approved Concession Agreement (CA), until 5 February 2009, Shareholders Agreement was signed among Lao Holding State Enterprise (LHSE), RATCH and Banpu.
LHSE, a state owned enterprise of Lao PDR, to jointly establish Hongsa Power Company Limited (HPC) and Phu Fai Mining Company Limited (PFMC), both of which have principle offices located at Vientiane in Lao PDR. The objectives of HPC and PFMC are to implement and operate Hongsa Project, a 1,800 MW mine-mouth power plant in Hongsa district, Xayabouri province of Lao PDR.